No Gasoline or Oil Price Relief Until Winter 2009, Says EIA

The average price of regular gasoline is expected to remain greater
than $4 per gallon until the fourth quarter of 2009, according to
DOE's Energy Information Administration (EIA). The EIA's "Short-Term
Energy Outlook," released on July 8, notes that crude oil spot prices
reached $145 per barrel on July 3, and crude oil prices are now
projected to average $127 per barrel in 2008 and $133 per barrel in
2009. Despite the higher prices, world oil consumption continues to
grow, while production increases have fallen short of expectations.
Although Saudi Arabia plans to increase its production by 300,000
barrels per day in July, that move is also limiting the remaining
surplus production capacity to about 1.2 million barrels per day, and
that surplus capacity is all located in Saudi Arabia. To place these
numbers in context, the world produced about 84.6 million barrels of
oil per day in 2007. For the latest crude oil prices, see the New York
Mercantile Exchange Web site.

With crude oil prices staying high, the EIA now projects that the
average price for regular-grade gasoline will stay well above $4 per
gallon for the rest of the year, causing the average for 2008 to end
up at $3.84 per gallon, an increase of more than a dollar per gallon
above last year's price. That trend will continue in 2009, with an
average price of $4.06 per gallon for regular gasoline. Diesel fuel
prices will also stay elevated, averaging $4.35 per gallon in 2008 and
$4.48 per gallon in 2009. According to the American Automobile
Association (AAA), regular gasoline and diesel fuel were at a record
average prices of $4.108 and $4.807 per gallon, respectively, on July 8. See the latest prices from the AAA Daily Fuel Gauge
Report.

While the nation is currently focused on the high price of motor
fuels, by this winter the focus may well change to electricity and
heating fuels. The EIA notes that the sustained high prices for
petroleum, along with other factors, are pushing up the spot price of
natural gas. The spot price is projected to average $11.86 per thousand
cubic feet (Mcf) in 2008 and $11.62 per Mcf in 2009, a 65% increase
over the $7.17 per Mcf average spot price in 2007. Utilities and gas
distribution companies tend to sign long-term contracts for natural
gas, so spot prices aren't necessarily reflected immediately in the
prices paid by businesses and homeowners, but they do indicate the
trend in prices. The trend is already apparent in the
electricity market, where prices are projected to increase 5.2% in
2008 and 9.8% in 2009. See the EIA's "Short-Term Energy Outlook."